Health Reform: Law, policy, us & our children Professor Sidney D. Watson, J.D. Saint Louis University School of Law Center for Health Law Studies March 13, 2012

Health Reform at Year 2… 2.5 million young adults newly insured 3.6 million Medicare enrollees saved $2.1 million, an average of $604 per person Preventive services at no cost Missourians with individual insurance – compare plans, premiums and coverage – Healthcare.gov Review premium increases for individual and small group insurance

Current health insurance system some real problems...Cost Insurance Policies are too expensive – $15,000 for family coverage – $5,400 individual – Premiums more than doubled in 10 years while wages have been flat Aging population – Health care costs are the fastest growing part of the federal budget

Employment is changing… Health insurance industry has changed… Fewer Americans work for large employers who offer and generously subsidize health insurance Small employers with older or sick employees are priced out Individuals buying on their own can be turned down because of pre- existing condition

Insurance is full of Holes Policies do not cover services people need Many policies have annual or lifetime limits on coverage Those who most need insurance can’t get it or afford it

…getting worse 1 in 6 Americans have no health insurance – 34 million when debated – Most recent U.S. Census reports 50 million 1 in 10 Americans have insurance that does not protect them – 25 million in 2010 – Medical debt is leading cause of personal bankruptcy

Building Blocks for Reform Health Insurance Reforms – Private insurance reforms – Medicaid expansion – Strengthening Medicare Delivery system innovations Workforce initiatives

Guaranteed Access to Insurance Insurance companies won’t be able to – refuse to issue and renew policies – Turn down people because of pre-existing conditions – drop people when they get sick Effective now – Young adults can stay on their parents policies up to age 26 – Children can’t be turned down because of pre-existing conditions – New High Risk Pools for adults until 2014

Premium Protections (2014) Plans won’t be able to charge higher premiums because of – pre-existing conditions, illness or injury – gender – occupation, etc. Premiums may only vary based upon – family size – age, but only up to 3:1 – smoking – “rating area”, i.e. location

Premium Protections (now) Caps insurance companies’ overhead & profits – 80-85% of premiums must be spent for medical care New oversight of premium rate increases

Comprehensive Coverage Policies must cover* – Preventive services with no deductibles or co-pays (now) well woman exams, colonoscopies, immunizations… contraceptives…. – Standard benefit package of “essential health benefits” for individual and small group plans (2014) *grandfathered plans exempted

Financial protections Financial protections for people with insurance Prohibits annual and lifetime dollar limits on coverage Sets annual out of pocket spending caps for consumer All plans must meet minimum actuarial value standards – At a minimum, cover on average 60% of cost of care – 70%, 80%, 90% coverage also available Modest income Americans will be eligible for tax credits to help pay for premiums & out of pocket costs

easier to buy insurance Health reform makes it easier to buy insurance. New Health Insurance Exchanges – Creates a competitive market place Make comparison shopping easier Reduce marketing costs Allow individuals and small businesses to get better rates because they are in a bigger pool

moderate-income Premium help for moderate-income Americans (2014) Tax credits to help families earning between % FPL pay premiums – family of 4 $30,657 - $92,200 – individual $14,856 - $44,680 Tax credits set on a sliding scale so premium costs range from 2%-9.5% of income. – Those earning less will be eligible for Medicaid

Other Building Blocks for Health Insurance Reform Private Insurance Medicaid expansion Strengthens Medicare

expands Medicaid Reform expands Medicaid for those who need it Medicaid will cover all families and individuals up to age 65 with incomes up to 133% FPL – family of 3 - $25,390 – Currently MO family of 3 must make less than $6,873 For the first time ever, childless adults without a disability can qualify for Medicaid Covered benefits must include new “essential health benefits”

Medicaid Strengthens Medicaid Enhanced federal contribution – Full cost for all those newly eligible, – 95%, in – 90%, thereafter – NOW: fed share averages 57% nationally, 63% MO Increases reimbursement for primary care to Medicare rates – , feds pay the full cost – NOW: nat’l average 66%, in MO 65%

Strengthens Medicare-now Closes the “donut hole” in drug coverage and lowers cost of brand name drugs (now to 2020) Provides preventive services with no co-pays or deductibles Reduces overpayments to private Medicare Advantage Plans Enhanced payments for primary care physicians and general surgeons Payment incentives for better coordinated care – Reduces hospital payments based upon preventable hospital readmissions

Yeah, but how do we pay for it?

Cost of reform…cost savings* CBO sets federal cost at $938 billion – Reduces federal deficit by $124 billion – 2% of federal budget – 2-3% of total overall health care spending Commonwealth Fund – Reduces annual growth in spending by about 6% – For families, $2,000 less in annual premiums Medicare Board of Trustees – Extends Hospital Trust Fund solvency for 12 years *Over 10 years

Shared responsibility Costs and responsibilities are shared among many Federal & state governments health care entities businesses Almost all Americans

Individual mandate Individuals U.S. citizens and legal residents must have health insurance or pay a tax penalty – No penalty if “affordable” insurance is not available No more than 8% of income – Exemptions granted for financial hardship, religious objections, those without coverage for less than 3 months, undocumented workers, incarcerated individuals

Health Reform in the Courts Florida vs HHS United State Supreme Court briefing just finished Oral Arguments start March 26 Individual Mandate Issues before the Supreme Court – (1) Constitutional authority for the individual mandate – (2) “Severability” If USSC strikes down the individual mandate does the rest of the ACA remain? – (3) Does the federal tax anti-injunction act bar this claim? Lower courts - 4 U.S. Courts of Appeals have ruled – 1: dismissed base on tax anti-injunction act – 2: mandate constitutional – 1: mandate unconstitutional, but severable

Health Reform in the Courts Constitutional Questions (1) Does Congress’s authority to regulate industries, products, and activities in or affecting interstate commerce include authority to penalize the failure to buy health insurance? (2) Does Congress’s authority “to make all laws necessary and proper” to carry out acknowledged power to regulate interstate commerce in health insurance by imposing restrictions to pre-existing conditions and premium protections include the authority to also impose an individual mandate which will make the other provisions less costly.

Health Reform in the Courts What if challengers win? What else falls if individual mandate falls? (severability issue) A few of the private insurance reforms: maybe guaranteed issue & premium pricing Among Medicare changes: maybe reductions in hospital Medicare payments (hospitals’ argument) What else could Congress do to encourage/require all Americans to have insurance to pay for medical care?

Alternatives to the Individual Mandate Congress’ constitutional authority to tax and spend –tax credit rather than a tax penalty child care, energy saving appliances –payroll tax Social Security, Medicare Congress’ commerce clause authority to regulate health insurance –Higher premiums if delay enrolling Medicare –Enrollment periods only once every five years –Get people to sign waivers that if don’t buy health insurance then won’t use medical care, prohibit bankruptcy for medical debt.

Building Blocks for Health Insurance Reform Private insurance reforms Medicaid expansion Strengthening Medicare

Reform